So... Are Government Workers Overpaid?

November 12, 2010

By ABCNEWS.COM

ABC News' Sherisse Pham reports:

Andrew Biggs, resident scholar at the American Enterprise Institute, posted a blog on AEI’s website yesterday criticizing an ABC News story refuting Sen.-elect Rand Paul's claim that the average federal government worker makes $120,000 year. Paul made the comments on ABC’s ‘This Week,’ adding that private sector employees make only half as much, about $60,000. In our story, we spoke with the Office of Personnel Management, the Bureau of Economic Analysis, and one private data collection firm, all of whom said federal workers make somewhere between $60,000-$80,000.

Andrew Biggs made some interesting points in his blog post, so we caught up with him today to get his take on the issue.

“I think you did wrong by him,” said Andrew Biggs, who noted in his blog post that ABC should have asked the senator-elect’s staff for clarification. ABC News did reach out to Paul’s office, but staff did not respond to requests asking for the source of his numbers.

Biggs said, rightly, that what an employee “makes” is not merely his or her salary. He crunched data from the Bureau of Economic Analysis and was able to re-create Paul’s numbers. Biggs' numbers are identical to those published in USA Today in August, which also pulled data from the Bureau of Economic Analysis.

Biggs' point is that Paul’s numbers were correct. However, he said, the incoming Kentucky senator's claim is still misleading.

“The point I made in the blog post, the numbers he’s citing are correct,” said Biggs. “The issue I have with [Paul] and his numbers, and the way USA Today does it, is that they’re not adjusting for experience.”

Biggs has worked these numbers in the past. He found that once you adjust for education and experience, along with standard controls such as race and gender, full- or part-time work, firm size, marital status, region, and residence in a city or suburb, federal employees still make more than their private sector counterparts -- the premium is about 12 percent. Biggs clarified that lower and mid-level employees enjoy a higher pay premium, while high-skilled federal employees – such as doctors – earn a low, and sometimes 0 percent pay premium.

Biggs’ average 12 percent pay gap is considerably lower than Sen.-elect Rand Paul’s – which is closer to 100 percent.

“Oh sure,” said Biggs, “and I’ve written elsewhere that it’s wrong, just making a straight up difference, not accounting for education and experience.”

The federal government maintains that pay differences reflect the superior skills of federal workers. And indeed, the government has to compete with the private sector, so a pay premium could be the way to attract premium talent. Biggs, however, finds fault with that argument.

“There’s a credibility issue,” he said. “You don’t want to underpay federal employees, but you don’t want to overpay them either.”